This story is taken from Jack Sirard at sacbee.com.
Money manager and author
for years has been an ardent supporter of "socially responsible"
investing, encouraging his clients to invest in mutual funds
that share their values. But now he believes it's time for
investors to take things into their own hands - and portfolios.
His advice is simple: Stop using socially responsible mutual
funds and invest directly in companies that you believe in.
What's his problem with those funds that have been the cornerstone
of most socially responsible investing (SRI) for years? They're
too broadly based, he says.
"Mutual funds are designed to speak to mass audiences
and, as a result, reduce socially responsible screening to
the lowest common denominator," he says. "While
they block you from holding shares of alcohol or tobacco companies
(for instance), they don't speak directly to most people's
In addition, by excluding broad classes of industries, investors
run the danger of having a less diversified and more volatile
The 59-year-old money manager says that SRI mutual funds deserve
enormous credit in showing the way to socially responsible
investing, allowing investors to avoid supporting such industries
as defense, nuclear power, gambling, tobacco and alcohol.
"But we want to take it to the next level, speaking directly
to investor values," he says.
putting your money directly into companies that earn exemplary
marks in the issues that are important to you.
says he zeroes in on companies that display the values most
significant to an individual investor. ,
who just published his 32nd book, "Profitable
Socially Responsible Investing?," says investors
first need to make certain the company they are thinking of
investing in measures up financially.
If it does, he says, then you should start looking at how
it performs in two areas: environmental performance and social
justice, which includes diversity, employee relations and
who works as a money manager, writer and teacher from his
Chicago office, says, "If a company is good to its employees,
it will have less turnover, lower recruitment costs and greater
productivity and efficiencies."
While there are costs in being a socially responsible corporation,
says those companies "ultimately are seen as better credit
risks and ultimately their cost of capital will drop, and
their return on equity will increase."
claims his strategy of investing only in companies that earn
the highest marks for social justice and environmental concerns
has generated results that outperformed the Russell 3000 over
the past eight years.
Asked for examples of investment choices that can test an
investor's social concerns,
points to Wal-Mart Stores Inc. and Costco Wholesale Corp.
"The two companies are in the same business but are an
obvious contradiction in business models," says ,
who teaches law at Northwestern University and a finance class
for MBA students at the University of Illinois.
"Wal-Mart built its business on low-cost employment and
has passed those savings along to consumers and ultimately
shareholders." But, he says, the company's wages and
benefits "are below par and it has been subject to charges
of discrimination against women and minorities."
Costco, he notes, takes a different approach. "It wants
high-quality employees and pays them better. Costco believes
that yields more productivity and better results," he
means investors can take control of their portfolios and use
them to push for social change.
"If you can effect social change in the boardroom and
still earn the same rate of return, why wouldn't you do it?"
Marc J. Lane is a Chicago attorney, a Master Registered
Financial Planner, and the President of Marc J. Lane Investment